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TMI Blog2019 (5) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts or third party private records or with third party statements, there are no grounds to presume any manufacture and clandestine removal of such huge quantities of cigarettes, especially when appellants operated under physical control of the department. The impugned order is liable to be set-aside on this ground alone. The demanded duty has been quantified by considering each Bag/ package/ bundle mentioned under an RR to be containing 2 cartons, each carton containing 48 Outers of 25 Packs of 10 cigarettes each. The duty which is levied on the concept of manufacture cannot be demanded on any presumptions and assumptions. It is on record that certain RRs, otherwise similar, were discarded as the same pertained to a period prior to commencement of production in LTCPL. This indicates to a vague criteria adopted for selection of evidences on the basis of which whole case is constructed. While going through the extracts of the diary recovered from the railway parcel agents, it can be seen that such diaries are not containing the name of LTCPL or any of its employee. There is no co-relation of the entries made in the diary with the RRs and allegedly manufactured quantities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 50,00,000/- on each of them for alleged violations. Shri Mohammad Hassan Hashmi, Commercial Manager and T.K. Ghosh Technical Head, both employees of LTCPL are in appeal against penalty of ₹ 20,00,000/- on each of them for alleged abatement. Shri Murlidhar Ojha, Supervisor and Rizwan Khan Factory In charge, both employees of LTCPL are in appeal against penalty of ₹ 5,00,000/- for alleged abatement. All the appeals are taken together for disposal as impugned order is arising from a common investigation and notice. 2. Facts of the case are that on an intelligence that LTCPL were clandestinely manufacturing and clearing Midland, Super match, Jet Brands of cigarettes without payment of Central Excise duty by suppressing the production, its factory at Bhopal was searched. 3. LTCPL Bhopal Factory was searched on 14/05/2010. It is alleged that an altercation took place between the visiting officers and the employees of LTCPL. An FIR was filed by the Officers against LTCPL employees and the Central Excise Officer posted in factory for physical supervision. It was alleged that the mob including employees of LTCPL and others were instigated to attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to why no action was initiated immediately against the quantities found in excess as alleged, and defective reconciliation is not tenable. It is also disputed by appellants that the Chart for Midland Non Filter indicates panchanama stock as ( Annexure-B) on 8/6/2010 as 3,70,400 sticks and RG-1 Stock as 120000 ( 120 TU). Whereas the RG-1 copy available on records indicates the stock to be 120 TU (Thousand units) packed and 144 TU Loose (Total 264 TU or 264000 Cigarettes). In his statements Shri R. B. Shukla, Director LTCPL contended, proceedings on 8/6/2010 were conducted in absence of any authorized representative of LTCPL and stock taken includes loose cigarettes which did not reach RG-1 Stage. He also disclosed the names and details about raw material suppliers M/s Orion Tobacco Pvt Ltd., Bhopal for supply of Tobacco, PCT and TOR etc. and packaging material printers as M/s Ayodhya Graphics, Bhopal. He also stated to have appointed M/s Crown Trading and M/s Globus Trading as Sole Selling Agents to whom cigarettes were sold from factory on payment of duty. M/s Ayodhya Graphics has been alleged to have supplied printed packaging material under Kuchha Slips. He also gave details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Another consignee dealer, Shri Suresh Chandra Tibra of Jaipur, stated in his statement to have received such cigarettes with bills and without bills as well from M/s Swastik Marketing, M/s Crown Trading and M/s Globus Trading, but denied to have any contact with anyone of LTCPL. He retracted his statement dated 22/7/2010. In his later statements he stated to have received Cigarettes from LTCPL and paid cash to persons authorized by Shri R. B. Shukla. Other investigations involve statements of distributors of Pan Masala, Bidi etc. who stated to have purchased cigarettes in cash from recipients of railway consignments. 9. A market Stock of around 18,500 Cigarettes was also seized in Jaipur during investigations for which separate proceedings have been initiated and same is not subject of present appeal. However it is observed that seized quantity is small as compared to the quantity declared as manufactured and cleared for payment of duties, and seized quantities are disputed as part of the quantities cleared on payment of duty. The proceedings initiated against such seizures are undertaken separately and therefore same are not part of present matters and not dealt h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from M/s Ayodhya Graphics, Bhopal. He stated that the manufactured cigarettes were sold to M/s Globus Trading and M/s Core Trading and he is unaware of the ultimate buyers of cigarettes sold by M/s Globus and M/s Core who were selling such cigarettes in MP, Rajasthan, and South India, etc. For Mohammad Hashmi, M. D. Ojha and Rijwan Khan, he stated that after their arrest they are not in contact. He stated he was not attending factory regularly due to his ill health and had appointed three managers. He later came to know about few instances of clearances without duty payment by such managers. In his statement dated 30/04/2014 he contested the reconciliation chart, that the same involves loose quantities and the panchnama proceedings on 8/6/2010 as drawn in absence of LTCPL authorized persons. 13. Shri Bharat Patel another Director of LTCPL and a co-appellant, in his statements recorded under Section 14 of the Central Excise Act 1944 stated to be a technical person, who attended setting up of the factory and supervision of production and he was not promoter of LTCPL. 14. In addition, statements of few persons in Bhopal were recorded, summary details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory existence) Demand on 63 RR x Bags x assumed qty B 367057 Bhopal Factory Alleged Stock difference on 05/8/2010 w.r.t. stock on 8/6/2010 C 10265895 Jaipur 29 RR Received from Bhopal Railway ( other then 77 of Jaipur) . Not shown to Agents D 20793648 Coimbatore 52 RR received from Bhopal Railway Shown to CSM Altaf. Stated cigarettes come from North India. E 12135987 Raipur 38 RRs shown to railway agent Samay Lal Janghel. No further investigation. 65750888 TOTAL (INR) 17. Against the demand confirmed on the alleged stock variations in Bhopal Factory and imposition of penaltie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns have been made for corroboration of such vague and unspecified statement. 18. For the demands made on the basis of RR based calculations , private records, and third party statements, alleging that such quantities of cigarettes were manufactured by LTCPL and transported through railway, the appellant s counsel contended that the same is derived under presumptions and assumption of quantities per RR basis ; that there is no evidence of nexus of LTCPL factory with such RRs and other evidences in the matters are in nature of encrypted private records and statements of third parties, and are insufficient to allege clandestine manufacture and removal, especially when the factory was operating under the physical supervision of the department. 19. Learned counsel contended that no investigations have been made with any of the Bhopal Railway Authority or railway agent or person booking the parcels, who booked the consignments at Bhopal Railway, how the goods were transported from Mandideep Industrial Area to Bhopal Railway Station, and how the RRs with description of goods as poly bundles, PP, packaging materials were related with registered manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of manufacture of alleged huge quantities, as there are no evidences of purchase, transportation and consumption of huge quantities of raw materials required to produce such alleged quantities, as presumptively calculated for each RR. He contended that revenue has not undertaken any investigation to establish procurement of huge quantities of other raw materials required for manufacture of quantity of final products, which were alleged to have been manufactured and cleared clandestinely. He has further submitted that Central Excise Duty is on manufacture, which cannot take place without consumption of raw material such as tobacco, filters, etc. which are to be purchased, transported, stocked and consumed in the factory of manufacture. In absence of any evidence to establish procurement, transportation, storage or consumption of raw materials, manufacture of alleged quantity of final products is not established. Thus the demand of duty on such quantity of final product which were not proved to have come into existence through manufacture, is not sustainable. He has relied on ruling of Hon ble Allahabad High Court in the case of M/s Continental Cement Company Vs Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oborative evidence is a must , and the probative value of such evidence has to be established, especially when such a finding would lead to civil/penal consequences. He relied upon the decision of this Tribunal in ASWANI CO. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-I2015 (327) E.L.T. 81 (Tri. - Del.) along with following decisions: (i) PHIL ISPAT PRIVATE LIMITED and others Vs C.C.E. S.T. -RAIPUR reported 2018 (11) TMI 912 - CESTAT NEW DELHI. (ii) CCE, Delhi-1 Vs. Vishnu Co. Pvt. Ltd. 2016 (332) ELT 793 (Del.) (iii) Commissioner Vs. Motobhai Iron and Steel Industries 2015 (316) ELT 374 (Guj). (iv) CCE Vs. Brims Products 2011 (271) ELT 184 (Pat). (v) Indo Green Textile Pvt. Ltd. Vs. CCE, Thane, Mumbai 2007 (212) ELT 343 (Tri Mum). (vi) Kothari Pouches Ltd. Vs. CCE, New Delhi 2001 (135) ELT 531 (Tri. Del). (vii) Rama Shyama Papers Ltd Vs. CCE, Lucknow 2004 (168) ELT 494 (Tri. Del). (viii) Shree SidhbaliIspat Ltd Vs. CCE, Nagpur 2017 (357) ELT 724 (Tri. Mumbai). 24. Learned Advocate further contended that LTCPL was working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to how revenue could score a point seeking an explanation on 4/4/2014 and for which LTCPL representatives could have been called on 08/06/2010 itself. Furthermore authenticity of the reconciliation is doubtful where there are contentions that loose goods (unfinished) were counted as finished goods in absence of LTCPL representatives and comparision of same with RG-1 Register (of finished goods) is untenable. We note that there is a mention in Panchnama dated 8/6/2010, about the paper seal dated 7/6/2010, signed by an officer (of Deptt), and pasted on the main gate, indicating that the factory was still under physical supervision. We find that on 8/6/2010 also, same officer is a part of the visiting team. In view of this we understand that allegations of unaccounted removals from factory, sealed and operating under departmental supervision cannot stand and an uncorroborated and vague statement of Shri R. B. Shukla does not come to help of revenue in this regard. We therefore hold that duty referred in Annexure B to notice, cannot be demanded or confirmed in view of above noted facts. 29. As regard the demand of duty on the basis of Railway Receipts, it is necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ependent evidences. As such denial of the cross examination by the Commissioner, is in contravention of the provisions of Section 9(D), is not on sound principles and even otherwise the said statements are shaky and weak evidences for the purposes of placing stand alone reliance. 31. The part of the demand which pertains to evidences collected at Jaipur and duty demand is mainly based on Railway Receipts and expenses diaries seized from the premises of Railway Parcel Agents. Other than these documents, the evidence is the statement of Shyam Sunder Chaudhary, Suresh Tibra s and Tulsi Makhija s in Jaipur and Statement of Shri CSM Altaf, Agent and Shri Mangalram Raj Purohit, Dealer in Coimbatore. In Raipur there is no document seized and only a statement of the railway agent is recorded by showing him the railway Receipts procured from Bhopal Railway. The documents seized at Jaipur and Coimbatore are admittedly the pocket note books maintained by Railway Parcel Agents of Jaipur and Coimbatore for recording their expenses. We note that in the said entries made by such Railway Agents, there is nothing to establish that such entries pertains to clandestine transactions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTCPL or its accountant or clerk or any employee. Thus the document upon which the Show Cause Notice has placed strong reliance has no probative value. Merely because the document have been produced during investigation, it does not establish its probative value. The Hon ble Supreme Court in the case of Bareilly Electricity Supply v Workmen, 1971 (2) SCC 617 has held that mere production of document does not amount to proof. Further, in the case of Life Insurance Corporation of India Anr v Rampal Singh Besin (2010) 4 SCC 491, the Hon ble Supreme Court has held that mere admission of a document in evidence does not amount to its proof . Para 25 of the said decision reads thus: We are of the firm opinion that mere admission of a document in evidence does not amount to its proof. In other words, mere marking of exhibit on a document(s) does not dispense with its proof, which is required to be done in accordance with law. 33. No primary evidence has been produced by the Revenue to show that LTCPL has effected sale of such huge quantities of Cigarettes. There is no tangible evidence of LTCPL having actually produced alleged quantities of cigarettes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at without any tangible evidence and was based only on inferences involving unwarranted assumptions and is vitiated by an error of law. The orders of the lower authorities were quashed. (ii) In Deena Paints v CCE: 2001 (43) RLT 805, raw materials and finished products were found lying in the factory in excess of what was entered in the statutory records, at the time of search of the factory. The foreman of the factory deposed that he had been working in the factory for 26 years and was keeping daily account of production in his diary, which he had handed over to the officers. He was responsible for the manufacturing the finished product out of the raw material. The Manager of the factory, who had been working in the factory for 20 years and looking after the Central Excise work of the factory and the day-to-day production deposed that the Note Book recovered from the Foreman contained details of production, which were genuine and correct. It was argued by the appellants in that case that the department has not brought on record any evidence that the appellants had procured additional raw material and manufactured the goods. It was, also argued by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only of receipt of some raw materials but not of others. Such evidence, according to this Tribunal, may create a doubt in favor of the revenue but cannot take the place of legal evidence. The order was set aside. (iv) In CCE v Laxmi Engg. Works, 2001 (134) ELT 811 (Tri-Delhi), during the search of factory premises, slips showing sale of different types of electric fans were recovered and seized. There was nothing on record to show if on physical verification of stock any excess raw material or finished goods were fund lying in the factory premises. In the absence of any corroborative evidence, merely on the basis of the slips allegedly recovered from the factory premises which did not even contain names of the customers or any other details regarding receipt of raw material or manufacture and clearance of electric fans by the Respondent, this Tribunal held that duty liability as demanded could not be fastened. In the reference application filed by the Commissioner against the said order of this Tribunal, the Hon ble High Court of Punjab Haryana held that even if some record recovered during the raid and was corroborated by some supportable evidence holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borative evidence in support of the revenue s case. (vii) In Vishwa Traders Pvt. Ltd v CCE, 2012 (278) ELT 362, the appellant had submitted that the Adjudicating Authority has passed the order on conjectures and surmises. It was submitted that documents recovered from the premises of the employees and third parties are not official records. Their cross examination had also been denied by the Adjudicating Authority. Serious charge of clandestine removal cannot be sustained on the basis of documents recovered from outside the premises of the assessee. It was submitted that despite large-scale investigation including visits to the premises of raw material suppliers, there was nothing brought on record to show that the appellant had purchased raw materials without recording the same in their books of accounts. The submission of the appellant was that demand cannot be upheld on clandestine removal on the basis of documents along with statements unless there is tangible, independent, corroborative proof like financial flow back, actual manufacture and clearance, excess purchase of raw material, electricity consumption, statement of workers, actual transportation of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack and sent along with subsequent consignments. Unaccounted quantities of packing material had been procured. It was contended on behalf of Revenue that the appellant had devised a clever modus operandi to clear the goods without payment of duty by multiple use of the same document which had been confirmed by the managers of the transport company who booked the consignments. Purchase of some raw materials had also been alleged. After going through the exhaustive evidence which was produced in that case, this Tribunal held that demand cannot be confirmed entirely on the basis of documents of the transporters. There should be independent corroborative evidence to support the finding of clandestine clearance. The Tribunal observed that for the quantity of finished goods allegedly removed clandestinely it would have required approx. 700 trips for transporting the same. No evidence had been adduced by the revenue to establish this. Procurement of essential raw material without accounting had also not been established. The Tribunal noticed that an identical issue of clandestine manufacture and clearance came up before a coordinate Bench of the Tribunal in the case of Durga Trading Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on in the factory of production; etc. 38. Needless to say, a precise enumeration of all situations in which one could hold with certainty that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case law on the subject in Centurian Laboratories v CCE, Vadodara, 2013 (293) ELT 689. The crux of the decision is that reliance on private records maintained by private persons for their own use cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and clandestine removal of such huge quantities of cigarettes, especially when appellants operated under physical control of the department. The impugned order is liable to be set-aside on this ground alone. 43. We further find that the demanded duty has been quantified by considering each Bag/ package/ bundle mentioned under an RR to be containing 2 cartons, each carton containing 48 Outers of 25 Packs of 10 cigarettes each. The duty which is levied on the concept of manufacture cannot be demanded on any presumptions and assumptions. It is on record that certain RRs, otherwise similar, were discarded as the same pertained to a period prior to commencement of production in LTCPL. This indicates to a vague criteria adopted for selection of evidences on the basis of which whole case is constructed. 44. Entire demand of ₹ 6,57,50,888/- has been confirmed by the Adjudicating Authority imposing equal penalty on LTCPL and Penalties on other appellants on the basis of unconnected and unspecific Railway receipts , third party statements, encrypted expense records of railway agents and few other documents seized from third parties. The seized pocket diari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore and even after the commencement of investigations, LTCPL was working under physical supervision of the department and it was not possible for the appellants to clear the cigarettes without payment of duty. A reference in this matter may be made to2018 (7) TMI 1207 (CESTAT ALLAHABAD) M/S MUSK TOBACCO (INDIA) PVT. LTD., OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, LUCKNOW, and also on 2018 (11) TMI 289 (CESTAT ALLAHABAD), M/S PELICAN TOBACCO (INDIA) PVT. LTD., OTHERS VERSUS COMMISSIONER OF CUSTOMS, C.E. S.T., AGRA holding that 10. Having considered the rival contentions and on perusal of record we find that though the Original Authority has not accepted that the unit was under physical control however the provisions of Rule 6 of Central Excise Rules, 2002 and Para 2.2 of Chapter IV of CBEC s instructions and cross examination of the officers who were posted in the factory and acceptance of the fact by Commissioner that manufacture used to take place only after de-sealing of the machines till such machines were re-sealed, we are satisfied and convinced that the unit was under physical control. Further during recording of his finding at Para 35 of the Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a plethora of decisions of higher forums. Secondly, We note that an unspecific and general statement does not shift the burden to proof of the essential and corroborative facts of purchase of raw materials, manufacture of excisable goods and its nexus with the goods under allegation. However it would be necessary to examine the judicial pronouncements in this regard. We note that while examining the nature of general confessional statements, the Hon ble Apex Court in MOHTESHAM MOHD. ISMAIL VERSUS SPL. DIRECTOR, ENFORCEMENT DIRECTORATE 2007 (220) E.L.T. 3 (SC) has held that 15. Apart therefrom the High Court was bound to take into consideration the factum of retraction of the confession by the appellant. It is now a well-settled principle of law that a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into service only when the court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom. 16. We may, however, notice that recently in Francis Stanly @ Stalin v. Intelligence Officer, Narcotic Control Bureau, Thiruvanthapuram ..... X X X X Extracts X X X X X X X X Extracts X X X X
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